Sunday, November 28, 2010

A Biotech cluster is a region, which is concentrated with interconnected businesses, suppliers and affiliated institutions in the biotech field.

In other industries, business clusters start with a large company, which attracts suppliers into the region. Technology entrepreneurs spin off from the large company and form smaller new companies. These new companies in turn attract venture capital and management talent, which help in the formation of more companies. The formation of biotech clusters on the other hand is way different from the traditional formation of business clusters. Discovery research in Universities as well as funding from NIH gives rise to intellectual property. This IP attracts biotech entrepreneurs to the region who develop the core technology and identify potential products. This in turn attracts venture capital and other investments. These start up companies form strategic alliances with big pharmaceutical companies for product development, marketing and distribution. Hence these clusters become hubs of activity with rapid entry and exit of organizations and individuals.

Governments in different countries are realizing the potential of Biotechnology to create new industries and are keen to develop and commercialize new discoveries in this field. However some countries like Japan and Germany where the governments are spending billions of dollars to create a biotech business clusters, have been unsuccessful. On the other hand UK and US have managed to develop successful biotech clusters. Even in the US regions like LA, Chicago, New York City have been unsuccessful in creating biotech clusters even though these regions have strong research universities, access to venture capital and favorable government policies.

Source: Meldman, M. and E. Romanelli, “Organizational Legacy and Internal Dynamics of Clusters”, working paper, University of Toronto, 2006

Analysts believe that what's missing in these regions is a rich social network to promote innovation. Such a network connects scientists, entrepreneurs, managers, venter capitalists and organizations, which allow the quick flow of information within and across different companies. Thus companies have easy access to a deep labor pool of scientists as well as managers and investors, which improves the efficiency of the industry. Moreover, biotech is a very risky field where the chances of loosing a job or a business running on loss are relatively high. In such cases social networks also provide job opportunities to a vast number of people.

Experts in the industry believe that ‘location’ has a strong influence on the prosperity of a Biotech start up company. Many experienced biotech executives and investors believe that start-ups should be located near a biotech cluster region. This would allow the involvement of experienced professionals and investors, thus enabling active collaborations and dialog. These are steps that are essential in taking the start up company to the next level.

However as the biotech industry grows, it remains to be seen whether the benefits of social networking in clusters outweigh the challenges of IP infringement and stiff competition within these clusters.

Wednesday, November 17, 2010

Oral contraceptives, more commonly referred to as “the pill," are used to preventpregnancy by changing estrogen levels. Oral contraceptives accounted for approximately $4.3billion in revenue dating back to 2006, 74.7% of which were within the U.S. The pill is considered a lifestyle drug, making marketing campaigns vital to the success of sales of the drug. How is this industry marketing to consumers around the world and handling the topic of sex?

Below are three videos from Asia, India, and the US. While watching the videos notice the ages of the actors, the reasons for taking the pill, and the use of humor!Can more be done to advertise in these and other countries? How can companies use advertising to break into more conservative countries where the topic of sex is taboo?

Thursday, November 4, 2010

Just as an add-on to this week's blog-post, we wanted to show an example of the differentiation in some product names based on countries. For this example, we're going to look at a very serious drug, Lupron (leuprorelin), which is indicated for the treatment of prostate cancer. Lupron has grossed over $2 billion in worldwide sales as of 2009 (IMS Health). As everyone knows, the diagnosis and treatment of cancer has grown rapidly over the past decade and it is drugs such as Lupron that help reduce the kill rate of terrible diseases.

Drugs treat people regardless of where they come from. But companies cannot just go out and simply offer the treatment with the same marketing strategy country by country. Companies often adapt their product name/logo to suit the cultural and language differences that exist in our global economy....case in point -- Coca Cola. The same is true for drug products, like that of Lupron.

Let's take a look at the variation in names and who sells the product in some countries:

The variations are very similar and there is no real definition of these words. So why do they need to change the names depending on the country? We can't find the direct reason. It's not like Lupron is an offensive word in any of these countries. So I pose this question to the world. Why is this done?

Wednesday, November 3, 2010

In class, there has been a lot of recent discussions about brand image, corporate branding strategy and approaches to global marketing. As we saw in the Kraft-Cadbury case, there was a distinct difference in the perception of the Nestle and Kraft corporate brands versus their product brand counterparts. This is mainly due to the corporate structure and the visibility of the product labels as opposed to the corporate logo. This "umbrella" strategy is also inherent within the pharmaceutical industry, where corporations release drug products that mainly speak for themselves in terms of their marketing power.

One thing that you have to understand about the pharmaceutical industry, is that pure consumer marketing does not truly exist. Yes, you'll see Lipitor TV advertisements time-to-time or the little clouds representing depressed beings not taking Zoloft. These blockbuster drugs are so well entrenched in the consumer's minds because...well, most people know someone who takes them. Most consumers who are in need of such drugs will opt to purchase the medication because it has a positive reputation and good credentials (meaning it works!). Consumers do not prefer one drug over the other because Pfizer has a stronger brand image than Novartis. Just as Nestle's Nestcafe brand stands strong on its own, Pfizer's Lipitor can transcend borders and fill consumer's cholesterol needs.

Regulations on direct to consumer advertising have made it more difficult for pharma companies to boost product awareness, and it turn, their corporate brand image. In 2006, the US General Accountability Office reported that pharma spent $4.6 billion on consumer advertisements and $7.2 billion promoting to physicians. In the EU, this type of marketing is banned, and therefore pharma companies have to employ different strategies to get their products in the minds of consumers. Currently, only the US and New Zealand are legally allowed to broadcast such commercials.

Zoloft Commercial in US

Most drug companies do not market via what's called direct to consumer advertisement. Rather, they have much different marketing strategies, especially when transferring manufacturing operations into foreign countries. For the most part, pharma and biotech companies pitch marketing to other businesses and do so by attending large conferences and traveling to various company sites. Another methodology is to push drugs into the hands of the physicians that control prescriptions. This can be quite a sticky issue and it is currently being tightly controlled by the legal system in the US. In other semi-regulated countries, preferential prescriptions may not be such a problem.

Then the only thing to really ask is how can a US pharma company market with a solid product make its way to Europe, Asia Pacific, or the BRIC countries? This is extremely complicated...but the basic answer is through partnerships and distribution agreements with well-established players in those local markets. Let's take Medtronic's bone morphogenic protein-2, called InFuse. This product helps in bone healing after surgeries. Medtronic manufactures and markets this product in the US, but has established an agreement with Pfizer for exclusive marketing in Europe. Medtronic still receives royalty kickbacks and benefits by extending its name on the label (manufacturer) in European countries. For Japan, which is a tremendous pharmaceutical market on its own, Medtronic reached out to Astellas (ranked 21 in global sales) for local marketing of its product.

The idea that drugs are driven by different market forces compared to typical consumer goods is reflected in Interbrand's ranking system. Do you see any pharmaceutical companies making the list? No you don't. These companies are immense, some with nearly $63 billion in revenues (J&J). So how do you quantify the brand power of these products? The answer is that you can't because its a whole different ballgame with completely different economic and political pressures. This does not mean there is no marketing involved...it only means that the strategy is completely focused on the product and its competitive advantages.